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“GCC 2010” WHAT CAN WE EXPECT?

The second edition of the General Conditions of Contract for Construction Works was published recently by the South African Institution of Civil Engineering. At first glance this edition differs radically from its predecessor, GCC 2004, but a closer inspection shows there are many similarities plus some significant changes. Chris Binnington discusses these in this article.

Background

For many years in South Africa the most widely-used general conditions for civil works were the well known “GCC 1990” conditions, but with progress in development of procurement procedures and emergence of more modern dispute resolution methods, the shortcomings in GCC 1990 were becoming apparent and in 2004 we saw the launch of “GCC 2004” which soon became the industry standard albeit we still encounter contracts being let under GCC 1990.

With the creation of the Construction Industry Development Board (CIDB) by Government, with a mission to create an enabling environment for a more efficient construction industry in South Africa, in order to add significantly to the country’s GDP as well as development of a viable industry, we witnessed a concerted effort to achieve more uniformity and cost effectiveness in the procurement of construction services. The CIDB limited the general conditions of contract to be used in South Africa by organs of State to four sets of conditions and suggested that the private sector should also limit the numbers of different contracts in use to improve the efficiency of contracting. Those four sets being: GCC, JBCC, FIDIC, and NEC. It was an opportunity to refine GCC 2004 further towards being easier to use, and fit better the standards for uniformity set by the CIDB – and so GCC 2nd Edition, 2010, came into being.

The Philosophy

The basic philosophy behind the launch of the 2nd Edition is simply to make it more effective in presenting the requirements and constraints relating to the manner in which the contract work is to be performed. In this regard there is stronger emphasis on clearer allocation of responsibilities of the parties, the allocation of risk to the party best able to manage it, and for the parties to consult more closely on issues where a decision or ruling by the Engineer is required. At the same time there has been an attempt to move away from the perception that the GCC is suited only for civil engineering works with Employer providing the design. GCC 2010 is now presented as being suitable to use in a “design and build” situation and where the projects comprise civil, building, mechanical or electrical works, or a combination of these disciplines.

Structure of GCC 2010

  1. While the philosophy outlined above suggests far-reaching changes or even a rewrite, this is not so. The great majority of clauses in GCC 2004 have been retained but the entire document has been rearranged. There are now 10 “clauses” or sections, each dealing with a particular aspect of the contract. This allows a topic to be referred to once only by referring to that section, instead of cross-referencing across the entire document to cover the topic. As a result the entire clause numbering system has been simplified. The 10 sections are:

1. General
2. Basis of Contract
3. Engineer
4. Contractor’s General Obligations
5. Time and related matters
6. Payment and related matters
7. Quality and related matters
8. Risks and related matters
9. Termination of Contract
10. Claims and Disputes

The document also contains a number of useful pro-formas and appendices, including standard Contract Price Adjustment Schedule, Adjudication Board Rules, Form of Offer and Acceptance, typical Contract Data, Performance Guarantee, and an Adjudication Board Member Agreement.


Salient changes and new features

Some of the more significant changes or new features are noted below in the applicable section of the document:

      2.    Basis of Contract:

Employers are encouraged to provide as much Data and Information pertaining to the project as possible to avoid simultaneous efforts by tenderers to gather the information themselves. Issue of disclaimers by Employers not accepting liability for information should be avoided – The Contractor is responsible for interpreting the information, while the Employer will be responsible for unforeseen risks, where they occur.

      3.    Engineer:

GCC uses only the word “Engineer” for the representative, or agent, of the Employer. Although an agent of the Employer, the Engineer is required to be impartial in making any ruling, contract interpretation, or price determination. Before doing so he is first required to consult with the Contractor and Employer, to seek agreement. Provision is made for an Engineer’s Representative, with powers delegated to him. Provision also exists for the Contractor, if dissatisfied with the E.R.’s decision, to refer to the Engineer.

      4.    Contractor’s General Obligations:

The main item to note is Sub-contracting. Provision exists for a selected subcontractor, but selection is by the Employer and Contractor in consultation and the Contractor becomes liable for the subcontractor as if he were a domestic subcontractor. Correctly in our view, provisions which allowed for direct payment to a selected subcontractor have fallen away. The Employer may now instruct assignment of a selected subcontract but this must be expressly provided for in the conditions of contract.

A minor point is the use of the term “construction equipment” for the appliances needed for execution of the work, instead of the previous term “plant” which now means machinery, apparatus etc. which becomes part of the permanent works. It is thus consistent with the International FIDIC contracts in this regard.

      5.    Time and related matters:

At start of the contract there will be a Contract Commencement Date when the contract comes into being, and a Works Commencement, when documentation formalities are completed. At the end of the contract the Engineer will issue a Certificate of Practical Completion and thereafter a Completion Certificate. At the end of the Defects Liability period the Engineer issues a Final Approval. The key document in this context is the Programme. At the start the Employer is obliged to give the Contractor sufficient information for him to prepare an initial programme, which is regularly updated. (Note the programme is not a contract document, the obligation to produce and maintain it is a contractual obligation) GCC 2010 also states in some detail what the programme content shall include, to enable its approval by the Engineer and for it to act as an effective planning and monitoring tool.

      6.    Payment and related matters:

Although the intention in the document is that variation orders shall be in writing, regrettably there is still a provision for oral variations; if given orally, they must be confirmed by the receiver. The powers to vary are wide. GCC 2010 lays down steps for valuation of variations, and detailed procedures for interim and final payment certificates.

      7.    Quality and related matters:

The provisions relating to quality of Contractor’s equipment. as well as quality of materials and workmanship in the permanent works are conventional and not unusual. Procedures are given for samples and testing, retesting and removal of improper work, making good and urgent remedial work.

      8.    Risks and related matters:

GCC 2010 follows the principle that the Employer will pay for the risk when it occurs and applies rules for the equitable apportionment of risk – risk is to be carried by the party best able to control it, and risks which are fortuitous and over which the parties have no control, are carried by the Employer. Where possible risks are to be insured against. The Contractor has a primary responsibility for care of the works and repair of damage. Where this is due to an excepted risk, repair work will be valued as a Variation Order.

 

      9.    Termination of the Contract:

This is a “last resort” not undertaken lightly. GCC 2010 caters for “forced” determination under circumstances which are described such as war, emergency etc, and for termination by Employer or Contractor under the usual material breach situations. In each case the conditions for and consequences flowing from termination are set out. Regrettably the Employer has not been given the unilateral right to cancel for any reason, apart from breach, which provisions are now standard in most International contracts.

      10.  Claims and Disputes:

GCC has detailed procedures for submission of claims, firstly for extension of time, commencing with requisite notices and recording of events – which records shall be agreed upon between Contractor and Engineer, and secondly through a “Dissatisfaction Claim”, arising from any other matter in connection with the contract.

In each case the Engineer is to give a ruling which if not acceptable to the Contractor, can lead to his issuing a Dispute Notice. Provision is made for an “Amicable Settlement” or cooling off period following this and if success is not achieved, the matter proceeds to Adjudication either to a “standing Board, or an ad hoc Board depending on the specific requirements of the contract. Procedure for this is laid down, closely following the rules put forward by the CIDB. After the Adjudicator’s decision is handed down, a further Amicable Settlement can be attempted, failing which Arbitration will ensue. The time period for disputing an adjudication decision is now prescribed within clause 10 as being not earlier than 28 days and not later than 56 days. Failure to lodge an objection to the decision will render it final and binding albeit the wording could have been improved (in clause 10.6.1.2) to have made this absolutely clear.
 

Conclusion

GCC 2010 is an earnest attempt to achieve general conditions of contract which are “right for our time”. It remains to be seen if it will become as widely used for works other than civil engineering field or where the bulk of the work is other than civil engineering. Since it is usually the professional team who recommend which form of contract is to be used it is to be hoped that contractors, consultants and clients give the new document a fair trial. SAICE have also published a “Management Guide” to assist newcomers to using GCC 2010 and this is an essential addition to the bookshelf of the Contract Administrator or the Procurement Officer, in any organisation.

Chris D Binnington
Managing Director
Binnington Copeland & Associates